WEF_GrowAfrica_AnnualReport2014

2013 in Review 2013 in Review
SPOTLIGHT
Netafim – Enabling access to last-mile
infrastructure through innovative finance
CONSTRAINTS
Private sector seeks deeper government
collaboration to unlock agri-sector
Gravity-based drip irrigation can make a transformative
impact on the productivity of smallholders in limitedrainfall
areas by extending growing seasons, thereby
expanding market opportunities during times when
prices for their crops tend to be higher. Low-volume
drip-irrigation technology can maximise productivity
without requiring additional investment in infrastructure,
such as pumps or electricity, and is suitable for plots of
small sizes. Combined with good agricultural practices,
such systems increase yield and quality and optimise
water efficiency by reducing run-off, leaching, and soil
erosion.
Netafim, an Israeli-based drip irrigation company,
sought to roll out its Family Drip System (FDS)
in Kenya, but the primary barrier to smallholders
accessing drip irrigation was the initial capital outlay
involved. However, a new partnership between Netafim,
USAID and local commercial banks is demonstrating
how cross-sector collaboration can overcome such
barriers to help establish crucial last-mile agricultural
infrastructure.
In order to expand drip irrigation to more smallholders,
Netafim has teamed up with an agricultural financeconsulting
firm to structure a non-collateral lending
programme through local commercial banks. Loans
will be provided to smallholders based on the earning
potential of the drip irrigation system. The necessary
work to structure and expand Netafim’s work with
smallholders has in turn been made commercially
viable by a grant from USAID’s Feed the Future
Partnering for Innovation scheme.
Companies highlighted the following constraints faced by their investments. If addressed, they could strengthen the
enabling environment and unlock further investment.
1. Administrative and regulatory barriers to business: the requirements for establishing new businesses are complex
and at times opaque, with companies required to visit multiple government agencies to acquire registration, work
permits and so on, taking up inordinate amounts of time. Simplified regulations and a one-stop shop could reduce
the transaction costs for new and existing business ventures.
2. Limited level of public-sector engagement: private-sector entities require constructive action-oriented relationships
with the public sector to identify constraints and work in partnership to overcome them. The last year of transition
and restructuring has made both government and its development partners inward-looking. Companies and farmer
organisations seek a more collaborative and concrete level of engagement moving forward. For example, seedling
nurseries, which offer a potential opportunity to foster youth entrepreneurs, require crucial public-sector support.
3. Shortage in local financial and risk-transfer expertise: the cost of finance remains high for smallholders and
agri-SMEs, but while risk management could help mitigate this, such services currently remain underdeveloped.
Limited local technical expertise on agricultural risk-transfer insurance is a challenge, particularly as regards local
distribution channels to a large client base. Regulatory and public-sector support is accordingly needed in building
domestic markets for insurance products in order for the commercial provision of these services (including to the
agricultural sector) to become viable.
A financing partnership is enabling Netafim to sell drip irrigation to Kenyan smallholders.
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